Big 3 think smaller: All are idling plants

December 18, 2008|By From News Services

The Big Three shrank their operations Wednesday as they wait for a federal rescue -- one that President George W. Bush said could be coming "relatively soon."

And early today, The Wall Street Journal reported that executives at General Motors Corp. and Chrysler LLC have restarted talks to combine the two ailing automakers. Cerberus Capital Management LP, the majority owner of Chrysler, signaled it is willing to part with some of its stake in the automaker, the Journal reported.

Chrysler -- the company most at risk of tanking -- announced Wednesday it will shut all 30 of its plants for at least a month starting Friday. Ford said it will idle most of its North American assembly plants for the first week of January. General Motors said a new factory making engines for the Chevrolet Volt electric car is being delayed to conserve cash.

The cutbacks showed how far automakers are going to save money and prune output in a year in which industrywide U.S. sales are poised to fall to their lowest levels since 1991. GM and Chrysler say they may run out of operating funds in just weeks without emergency aid.

The White House and the Treasury are deep into negotiations with General Motors and Chrysler over a restructuring plan that could result in freeing up more than $14 billion in emergency loans to keep the companies afloat through the first quarter of 2009, according to industry executives and a senior administration official.

The administration appears to want an agreement with the automakers before Dec. 25. It is unclear, however, when all of the particulars will be worked out, said a senior official, who spoke on the condition of anonymity because of the delicate nature of the negotiations.

But the senior official indicated that the administration was inclined to do more than just keep GM and Chrysler alive until President-elect Barack Obama takes office Jan. 20. "Giving them enough money to limp along doesn't solve anything," the official said.

In the negotiations, Treasury Secretary Henry Paulson is effectively taking on the role of "auto czar" that was envisioned in the auto-rescue bill written by the White House and congressional Democrats and approved by the House but blocked by Senate Republicans.

Chrysler: We have buyers, but . . .

The lack of consumer credit is hampering sales and forcing production cuts, Chrysler LLC said in a statement. Chrysler, Jeep and Dodge dealers say they have willing buyers for vehicles, but they can't close the deals, Chrysler said.

"The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation," the statement said. In the case of some plants, such as the Toledo Jeep plant in Ohio, operations will resume Jan. 26, but with one fewer shift. More than 750 workers are being cut on the second shift at the Toledo North plant, said a union official. About 550 workers took a retirement package, and 200 will be indefinitely laid off.

Chrysler warns its dealers

Also Wednesday, Chrysler Financial, the company's dealer- and consumer-finance arm, warned dealers that it may temporarily stop financing vehicle inventories if dealers keep pulling large amounts of their money out of an account that helps fund those loans.

Chrysler Financial said in a letter to dealers dated Friday that recent withdrawals from the company's cash-management account have been "unusual and unprecedented." Thomas F. Gilman, Chrysler Financial's chief executive, said in the letter that dealers have withdrawn more than $1.5 billion from the cash-management account since July, and daily withdrawal requests are near $60 million.

Amber Gowen, a spokeswoman for Chrysler Financial, said the company continues to provide financing for 75 percent of all Chrysler LLC vehicles shipped to U.S. dealers.

Cutbacks at Ford, GM

Members of the United Auto Workers union on temporary layoff are eligible to receive 95 percent of their usual take-home pay, from a combination of unemployment-insurance benefits and a supplement from automakers. Labor costs make up about 10 percent of the cost of producing a vehicle.

The idling of the Ford factories is part of a previously announced plan to reduce first-quarter North American production by 38 percent, to 430,000 cars and trucks, spokeswoman Angie Kozleski said in an interview. Of 15 assembly plants in the region, nine are closing temporarily, three are unaffected and three more are being retooled.

General Motors Corp. indefinitely suspended work on the $370 million factory in Flint, Mich., that will make four-cylinder engines for the Volt and the Chevrolet Cruze small car in 2010.

Spokeswoman Lynda Messina said the plant is still scheduled to produce the engines in 2010, when the Volt is supposed to debut. The Volt is being designed to run 40 miles on battery power before needing a recharge from the onboard gasoline motor.